The valid return value should be MODIFY instead of MODIFIED.

The valid return value should be MODIFY instead of MODIFIED.
The error message said so :-)

In 25.3. Using PL/Python

        If the trigger "when" is BEFORE, you may return None or "OK"
        from the Python function to indicate the tuple is unmodified, "SKIP"
        to abort the event, or "MODIFIED" to indicate you've modified the tuple.

should read
        If the trigger "when" is BEFORE, you may return None or "OK"
        from the Python function to indicate the tuple is unmodified, "SKIP"
        to abort the event, or "MODIFY" to indicate you've modified the tuple.

elein